–58% Predict Moderate Upward Price Influence From Materls,Non-Lbr Costs

By Brai Odion-Esene

WASHINGTON (MNI) – A survey released by the Atlanta Federal Reserve
Bank Monday showed businesses in the Sixth district continue to raise
their expectations for inflation in 2012, now expecting an increase of
2.1% compared to the expectation of a 2.0% rise in March’s survey.

In addition, over 50% of respondents to the survey expect non-labor
costs to exert a moderate upward pressure on prices over the next 12
months.

“Inflation uncertainty rose from 2.4% in March to 2.7% in April,”
the Atlanta Fed said.

Firms also reported that their unit costs had risen 1.9% compared
to this time last year, compared to their assessment of 1.8% in March.

The survey was conducted April 9-13 with 165 firms responding to
questions about their business conditions, inflation outlook, and
potential pricing pressures.

The survey said businesses are still operating in an environment of
below-normal sales and depressed margins.

“Looking forward, firms’ expectations for non-labor costs rose in
April, with 57% predicting a moderate upward influence on prices coming
from materials and other non-labor costs over the next year,” it said.

And according to the survey, 18% predicted “a strong upward
influence” from those costs — the highest percentage since the survey
was launched in October 2011.

As for labor costs, the survey said firms anticipate labor costs
will put “little or only moderate” upward pressure on prices over the
next 12 months.

“Respondents also anticipate that their sales, margin adjustments,
and productivity are likely to have a small, though positive, influence
on prices in the coming year,” it said.

The survey also included a special question — asked during the
first month of each quarter — aimed at measuring firms’ inflation
expectations and inflation uncertainty over the longer term.

It noted that on average, survey respondents in April projected
unit costs to rise by 3.0% per year over the next five to 10 years,
which is 0.1 percentage point higher than in February, the previous time
the question was asked. Firms’ uncertainty about the future path of
inflation declined to 2.6% from 2.8% in February.

** MNI Washington Bureau: 202-371-2121 **

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